Ab Bus Hogaya

Dr.Swamynathan, Assistant Professor (Senior Grade), PSG Institute of Management, Coimbatore Prof. Umesh Chandrasekar, Professor, PSG Institute of Management, Coimbatore Dr.Swamynathan, Assistant Professor (Senior Grade), PSG Institute of Management, PSG College of Technology Peelamedu Coimbatore 641 004 Tamil Nadu swamynathan1@gmail.com Mobile :0 936 00 22 100 Office : 0422 4304400, 0422 2577252 Prof. Umesh Chandrasekar, Professor, PSG Institute of Management, PSG College of Technology Peelamedu Coimbatore 641 004 Tamil Nadu umesh.timesofindia @gmail.com Mobile : 0 890 31 37 39 0 Office : 0422 4304400, 0422 2577252

Case Abstract
*Dr.Swamynathan, Asst.Professor (Senior Grade), PSG Institute of Management, Coimbatore **Prof. Umesh Chandrasekar, Professor, PSG Institute of Management, Coimbatore

Ab Bus Hogaya is an example of a typical situation faced by every sales/marketing executive. The case attempts to make young business graduates understand that dealing with customers and closing a business deal is not a simple exercise, but one requiring a lot of background work, lateral thinking and soft-skills to manage what one terms as a difficult customer. It also will aid students to appreciate the nuances of corporate strategy and to reinforce the notion that customer retention through effective relationship marketing would at times be a better option than other methods in sales management. Key words: Sales / Marketing strategies, Market share, Market positioning, Customer relationship, Relationship marketing.

Ab Bus Hogaya
*Dr.Swamynathan, Asst.Professor (Senior Grade), PSG Institute of Management, Coimbatore **Prof. Umesh Chandrasekar, Professor, PSG Institute of Management, Coimbatore

It was 9 a.m. Monday morning. Mr Moorthy, Regional Manager at Raleigh Leasing Ltd broke out into a sweat as he put the phone down. The accountant at Amla Group of institutions, his old buddy who worked at 2%, rang to tell him that in spite of his sincere recommendations, the trustee had second thoughts and had put his foot down. No way was he going to pay the Rs.1 lakh administration fee for Raleigh Leasing Ltd to get a loan to buy school buses. The Managing trustee of Amla group, Mr.Abdul had calculated differently. The interest was okay and so was the 36 month pay-time. He could go to someone cheaper- the Katak finance co had wanted only 25k for the same deal and were ready to even throw in free service and besides, give trustee a buy-back option at the end with a low-low price for the bus. The Group would need more buses in the coming months. They needed at least one right away. On Friday afternoon, the accountant had given a cheque to Moorthy to deposit as advance payment- a whole lakh. Moorthy, feeling elated at the order, put the check away in his desk drawer, reminding himself to send the office peon to bank it after he came back from the urgent meeting at regional headquarters. Invicta Bus Ltd., the suppliers, had wanted a Rs.1 lakh Demand Draft as advance payment from Moorthy to book the bus and if they did not have the draft by Friday afternoon, then there would be a delay of 3 months in getting a bus. The accountant was clear that the school classes would resume a week from today and the bus was required a.s.a.pi.e. in 7 days flat and Moorthy just wanted to help him and already the cheque was with Invicta who no doubt had banked it. The situation was simple. Amla would stop their Cheque, cancel the order and Invicta would demand Rs 21 lakhs more which he would legally owe them and at the end of it even if he coughed up the balance, all he would have is a bus which no one wanted and a lot of explaining to do to the higher-ups. This was not the first time or the last time. Though his branch recorded the lowest number of default clients, Moorthy was able to hide this using creative accounting. It was not his fault if his client rammed the vehicle to a tree and the insurance company was delinquent in paying up. The company had a great market share: over 2/3 of the new business and of the repeat business would come to them. Thanks to friends like the accountant, he had a good hold on the institution and corporate business as part of
*Dr.Swamynathan, Asst.Professor (Senior Grade), PSG Institute of Management, Coimbatore **Prof. Umesh Chandrasekar, Professor, PSG Institute of Management, Coimbatore

the game. He was pushing for the company to go into consumer finance- a lucrative growth area. Katak finance had cornered the market and were competitively pricing their deals and talking in terms of offering 48-60 month leases with attractive buy-back options. Wearily he picked up the phone to see if Invicta would see reason well, in short they did not. The bus which Moorthy had ordered was a one-off cancellation and the only bus they had. Besides, an overtime-hungry operator had painted the Amla livery and logo on the bus overnight and there was nothing they could do. The trustee was a man with a short fuse. The accountant was told in no uncertain terms to get a bus in by next week or else. He had burnt the Moorthy bridge- now only Katak could save him. Goota at Katak offered him tea and sympathy and rang Invicta to order a bus. The reply he got was that there was a three month wait, sorry. The account gesticulated to Goota to ask Invicta about Moorthys order- Invicta promptly replied that they were not in a position to discuss other clients but it was suffice to say that the expected to deliver the bus to Raleigh by Monday. The accountant walked out of Katak in the RIP (Resignation In Pocket) mode- He dragged his feet and walked the long walk back to his office. Moorthy too was in a similar mood. He had committed a huge blunder and his world had unraveled. This was only the proverbial tip of the iceberg. Raleigh Leasing was a funny company to work for. Started by the chit-fund king Rally, the company specialized in leasing trucks and buses to SMEs across India. Coimbatore office was the hub for the 20 men sales team who covered the district. Educational institutions were a major client and Rally personally had invested time, sweat and money to cultivate this market. Besides a lot spinning mills regularly leased buses for ferrying their employees and indeed Coimbatore was a lucrative market. Given the share they had, certain complacency had set it. The branch had over 1000 live accounts and the default rate was very good at a 1-2% in numbers- in value if was as much as 30%. That was worrying. The sales force was based on a fixed salary plus overriding commission on the deals they managed to finalize. They worked to a set template for due diligence enquiries and many times clients were deterred with the sheer amount of
*Dr.Swamynathan, Asst.Professor (Senior Grade), PSG Institute of Management, Coimbatore **Prof. Umesh Chandrasekar, Professor, PSG Institute of Management, Coimbatore

paperwork. Kataks strategy was different. They worked only through clients banks and even paid a fee to them to vet the applicants. Besides, they spread their risks well, never exposing themselves to risks and hence their market share was barely inching forward in the commercial business. In retail business, they were the king since they had agreements with various companies for direct deduction of vehicle loan installments from the salary accounts. Moorthy decided to convince Abdul of Amla institutions to bear with the contract this time for some lucrative offer in near future. His appointment was honored over phone and Abdul was only insisting that he wanted that future promise to be delivered now and so that their business relationship could continue longer. Something else happened which made his life slightly better. The bank called to confirm the Amla cheque he banked earlier in the day , just as a gamble, had cleared. Abdul on the other hand had few more problems looming up. The first and fore-most was that he was not in a position to buy the buses at full cash payment- for the trust committee would object unanimously. He could not go crawling to the committee and admit it was his mistake that he delayed booking the school buses, and when he booked, it was a time when Invicta was having a full order-book and was meeting the peak demand of the school season. The parents of schoolchildren would not accept selling point for the school and parents would deeply resent this failure. Raleigh Leasing Ltd, would not refund the Rs 1 lak cheque and, if at all they did, it would be a good six months. Katak finance, though economical, could not get the bus since Raleigh Leasing Ltd had paid the advance. Invicta motors would most certainly claim for an indemnity if the bus was not purchased in 5 days for they had already painted Amlas logo and name into it, and they could not sell it to some other party immediately. Imbran, the secretary of Amla Institutions had booked four fancy numbers with the RTO office by paying Rs.25,000/- for each number .The RTO had asked him to register those numbers within 10 working days or he would lose them. The loss of the numbers would dent their prestige further. The Tamilnadu government had started looking closely into school education by introducing fee ceiling, Uniform syllabus
*Dr.Swamynathan, Asst.Professor (Senior Grade), PSG Institute of Management, Coimbatore **Prof. Umesh Chandrasekar, Professor, PSG Institute of Management, Coimbatore

any

excuses if the school buses were not running from the re-opening day. This was the

scheme, new safety regulations for the approval of school buildings etc. This would have a real impact on the revenue of private schools in the State. The question was, how could this mess be sorted out without making any enemies ? 1. What should Moorthy do as a team head to manage the current market share? 2. As a marketing/sales executive, can you understand the tensions involved in this business deal? If yes list them and try to improvise certain sales strategies for the same. 3. Abdul is an example for a typical corporate customer in India- comment 4. Identify the business operation strategies of RLL and Katak, and also the benefits to corporate clients arising out of intense competition among suppliers.

Exhibit - 1

- Net discounted cost of Rental - Net discounted cost of Hire Purchase - Net discounted cost of Cash Purchase Summary of Contract Terms Lease Hire Rental Purchase

1768389.94 1809506.81 1967241.29 Financial Assumptions Purchase date(month)January Return on capital12%

*Dr.Swamynathan, Asst.Professor (Senior Grade), PSG Institute of Management, Coimbatore **Prof. Umesh Chandrasekar, Professor, PSG Institute of Management, Coimbatore

Cost

equipment Annual interest rate Term Payment

of employed 2260000.00 2260000.00 Tax 6.82 % 3 Years 7.58 % 3 Years End(month) Tax Rate Tax Allowance

Year

March 19% 25% WDA

Monthly Monthly frequency Periodic rental 69005.36 69696.78 Cashflow analysis comparison is RENTAL with a net saving of 41116.87 over HIRE PURCHASE and 198851.35 over CASH PURCHASE

*Dr.Swamynathan, Asst.Professor (Senior Grade), PSG Institute of Management, Coimbatore **Prof. Umesh Chandrasekar, Professor, PSG Institute of Management, Coimbatore